The rampant illicit tobacco trade and misdeclaration of vapor products are projected to cost the government P240.3 billion in excise tax leakages over the next three years. Data from the Bureau of Internal Revenue (BIR), as estimated by the OSSTG Ways and Means Committee, showed the government will lose P171.95 billion and P5.94 billion, respectively, due to the illicit trade of cigarettes and heated tobacco products.
The misdeclaration of vape products is also expected to impact collections, resulting in a P62.52 billion shortfall. In the public hearing of the Senate’s Ways and Means Committee on Thursday, Dondanon Valera of Excise Large Taxpayers Service said the BIR has collected P134 billion in excise tax on tobacco products in 2024. This is lower by 27.68 percent than the P185.3-billion target collection for the year, thus resulting in a shortfall of P51.3 billion. One of the reasons for the decrease in excise tax collection “is the change in consumption pattern of smokers from using traditional tobacco or cigarettes to vape products. Another one is, of course, the illicit trade,” Valera said.The BIR has conducted 141 enforcement activities against smuggled vape products and raided large-scale manufacturers of illicit cigarettes in the country. Valera said illicit cigarettes are also blatantly sold on online shopping platforms, making them accessible to the public. Customs Assistant Commissioner Vincent Philip C. Maronilla said the Bureau of Customs (BOC) conducted 228 seizure operations of tobacco products and 90 seizures of vape products in 2024. The value of the seized commodities is worth P9.194 billion, more than double the P3.823 billion worth of seized smuggled tobacco and vape products in 2023. The illicit products were confiscated through warehouse raids, port seizures due to smuggling and open-sea apprehensions in the southern part of the Philippines, according to Maronilla. The gradual increase in excise taxes over the years has likely created a greater incentive for smuggling, as smugglers can avoid paying higher taxes, Maronilla added. “The higher the incentive for smuggling, the higher the product should be guarded against,” he added.According to Assistant Secretary for Health Policy and Systems Development Kenneth Ronquillo, the added presence of illegal cigarettes and vape products in the market poses more significant health risks.The implementation of excise tax measures already in force is recommended to be continued and strengthened. Lawmakers have advocated a moratorium to temporarily suspend the annual tax hikes on cigarettes and other tobacco products. (See: https://businessmirror.com.ph/2025/01/09/solons-seek-halt-in-annual-tobacco-products-tax-hike/).“Cutting a few pesos per pack will not address illicit trade and will only make cigarettes more accessible to the poor and youth while forgoing billions in revenue, at a critical time that the economy is struggling to find fiscal space,” it said
EXCISETAX SMUGGLING TOBACCO VAPEPRODUCTS PHILIPPINEGOVERNMENT
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